Japan Seeks LNG

Japan may be dusting off its copy of Donald Trump’s The Art of the Deal as it looks to develop long-term liquefied natural gas (LNG) contracts.

What happened: The Japanese government has encouraged its LNG importers to initiate longer-term deals that would protect the country from the fluctuating prices and supply struggles that have become an issue since the Russia-Ukraine war.

Background: Japan is a net importer of energy and has been the world’s top importer of LNG for the past 50 years.

• The lone exception was in 2021, when China took that top spot.

Despite being the fifth largest energy consumer in the world, Japan does not have the resources to support its energy demand. Being an island nation without access to gas or oil pipelines, LNG plays a key role in Japan’s energy mix. It’s also a key part of its transition to net zero plan as it moves away from coal.

Japan has been susceptible to volatile energy prices. The recent sanctions on the Russian Arctic LNG 2 project – of which Japan owns a 10 percent stake – could also impact its energy supply.

Competition heating up: Japan is not alone in its hunt for energy security. So far this year, China, France, Germany and Bangladesh have all signed 10+ year deals with Qatar for LNG supply.

• Japan’s annual LNG supply is expected to decrease by 30 percent between 2022 to 2030, unless more deals are brokered.

Japan has started to build up its LNG reserves for the winter, maintaining a focus on securing gas supply.

Zoom out: Energy security will be a major point of discussion at COP28 as countries balance energy security with the energy transition.